| MFs skip CDs, CPs on limited inflow | |
| Newswire18 / Mumbai November 21, 2008, 0:40 IST | |
Mutual funds shunned investing in certificates of deposit and commercial papers On Thursday as they received limited inflows in their schemes, dealers said.
Banks are preferring to park their surplus cash in these money market instruments rather than call money or with Reserve Bank of India’s reverse repo auctions as the CDs and CPs offer higher rates.
According to dealers, banks are expecting that the rates may fall in the coming days, so they are preferring to invest in these papers at these higher levels.
Mutual funds are also very cautious about their investment plans as the payments for the corporate advance taxes are nearing.
Mutual funds expect that they will face redemptions from companies during the first week of December.
On Thursday, three-month CPs were quoted at 14-15 per cent, unchanged from Wednesday, while three-month CDs were quoted at 9.5-10.5 per cent compared with 10-11 per cent.
On Thursday, overnight Mumbai Interbank Offered Rate was at 6.29 per cent compared with 6.50 per cent on Wednesday.
Secondary market Rates fell by 20 basis points as banks continued buying papers in the secondary market as they had surplus cash with them, dealers said.
CDs and CPs,” said a dealer with a mutual fund.
CDs maturing in December were dealt in the band of 7.75-8.25 per cent, compared with 8-8.5 per cent Wednesday. State Bank of Bikaner and Jaipur’s December maturity CDs was dealt at 7.75 per cent compared with 8.25-8.50 per cent for similar maturity papers on Wednesday.
March maturity papers were dealt in the range of 9.25-9.75 per cent compared with 9.50-10 per cent on Wednesday.
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